Answered: a. Find the expected value of the cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Mr. John Backster, a retired executive, desires to invest a portion of his assets in rental property. He has narrowed his choices to two apartment complexes, Windy Acres and Hillcrest Apartments. The anticipated annual cash inflows from each are as follows:

Windy Acres		Hillcrest Apartments
Yearly Aftertax Cash Inflow	Probability		Yearly Aftertax Cash Inflow	Probability
$30,000	0.2		$35,000	0.4
35,000	0.2		40,000	0.2
50,000	0.2		50,000	0.1
65,000	0.2		60,000	0.3
70,000	0.2

a. Find the expected value of the cash flow for each apartment complex. (Enter the answers in thousands.)

	Expected cash flow
Windy Acres	$
Hillcrest Apartments	$

b. What is the coefficient of variation for each apartment complex? (Do not round intermediate calculations. Round the final answers to 4 decimal places.)

	Coefficient of variation
Windy Acres
Hillcrest Apartments

c. Which apartment complex has more risk?

multiple choice

Windy Acres
Hillcrest Apartments

Please show how to work this out in excel

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